German carmakers have expressed significant concerns regarding U.S. President Donald Trump's proposed tariffs on auto imports, warning that such measures would lead to higher prices for American consumers and negatively impact the global automotive industry, Reuters said.
U.S. President Donald Trump's tariff plans would raise car prices for U.S. consumers and hit global automakers, Germany's powerful car industry warned on Tuesday. Auto stocks fell on the prospect of higher U.S. import duties, according to AP News.
Trump, who took office on Monday, did not immediately implement the extensive tariffs he had promised. However, he stated that they remained an option and suggested that tariffs of 25% on Canada and Mexico could be imposed as early as February 1st, CNN said.
Volkswagen, in particular, highlighted the potential "harmful economic impact" of the proposed 25% tariffs on imports from Mexico, where it operates a major manufacturing facility in Puebla.
This plant produces nearly 350,000 vehicles annually, including models like the Jetta, Tiguan, and Taos, primarily for the U.S. market.
The company emphasized its commitment to the U.S. market, noting planned investments exceeding $10 billion, split between its Chattanooga plant and a joint venture with Rivian, according to Reuters.
President Trump’s order also aligned with his recent proposal to create an agency he referred to as the External Revenue Service, which would be responsible for collecting tariffs.
The order requested officials to investigate the feasibility of establishing this agency and to recommend the best methods for designing, building, and implementing it. Currently, tariffs and other import duties are collected by Customs and Border Protection, according to the New York Times.
President Trump has commended tariffs for their potential to support U.S. factories, generate revenue to fund the tax cuts he aims to implement, and generally act as leverage in negotiations with other countries, the New York Times said.
Hildegard Mueller, president of Germany's VDA auto association, cautioned that the tariffs could drive up U.S. inflation, counteracting President Trump's campaign promises to reduce it. She advocated for further discussions to prevent such economic repercussions, Reuters said.
The financial markets have already responded to the tariff threats, with shares of European automakers like Volkswagen and Stellantis experiencing declines.
Analysts suggest that if the tariffs are implemented, a significant portion of vehicles sold by these manufacturers in the U.S. will become less competitive, potentially leading to market exits, according to The Times and The Sunday Times.
In response to these developments, European carmakers, represented by the industry body Acea, have urged EU leaders to negotiate a "grand bargain" with President Trump to avoid a trade war.
Ola Källenius, CEO of Mercedes-Benz and president of Acea, emphasized the urgency of finding a negotiating position with the U.S. to prevent growth-stifling tariffs, The Financial Times said.